SINGAPORE- Asian shares nudged higher and the dollar was at a two-month low on Wednesday ahead of crucial US inflation data that will help gauge whether the Federal Reserve is at the end of its aggressive rate hike policy.
The Japanese yen strengthened against most major currencies and last fetched 139.43 against the dollar, its highest in a month.
MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.61 percent higher, while Australia’s S&P/ASX 200 index rose 0.54 percent. Japan’s Nikkei slid 1 percent.
Economists polled by Reuters expect the consumer price index, scheduled to be released later on Wednesday, to have risen by 3.1 percent in June, after May’s 4 percent increase That would be the lowest reading since March 2021.
“This data point probably will not change the Fed’s well-communicated intention to resume hiking at the July FOMC meeting,” Saxo Markets strategists said in a note.
“However, if the core CPI decelerates as anticipated, investors may continue to keep the odds for September and November rate hikes low.”
The core rate is expected to have dropped for a third month to 5 percent from 5.3 percent, though that is more than double the Fed’s 2 percent target.
Markets are pricing in a 92 percent chance of a 25 basis point hike later this month, FedWatch tool showed, but remain doubtful of further hikes after that.
Fed officials have indicated they expect to hike interest rates by at least another 50 basis points as they tackle persistent price pressures.
China shares eased 0.14 percent, while Hong Kong’s Hang Seng Index rose 0.5 percent in early trading. On Monday, China extended some policies to shore up the real estate sector until 2024-end, stoking expectations of more stimulus.
Rodrigo Catril, senior FX strategist at National Australia Bank, said a meaningful fiscal spending announcement was needed for the market to become more positive on China.
Investor attention will also be on second-quarter earnings this week, with results due from some of Wall Street’s biggest institutions, including JPMorgan Citigroup and Wells Fargo
Wall Street banks are expected to report higher profits for the second quarter as rising interest payments offset a downturn in dealmaking.
